These comments appeared in the Epoch Times on October 8, 2025:

Credit Card Use in US Records Sharp Decline

The slowdown in borrowing suggests households may be shifting from credit-fueled spending to greater caution.

Americans’ use of credit cards in the 12 months through August saw its steepest contraction since the COVID-19 pandemic recession, suggesting that the U.S. consumer sector may be shifting from credit-driven resilience toward a more cautious footing.

According to the Federal Reserve’s G.19 Consumer Credit report for August, total consumer credit grew at a negligible 0.1 percent annual rate, a sharp deceleration from 4.3 percent in July. Revolving credit—primarily credit cards—fell at a 5.5 percent annualized rate.

Journalist Tom Ozimek requested implications for: (1) household spending, (2) consumer sentiment, and (3) the broader economic outlook.

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My responses:

(1) While there is not a one-to-one relationship between credit-card borrowing and household spending, it is still tight. Any decline in credit limits or credit utilization will hit luxury goods hardest, because the decline suggests a reduced perception of wealth among card users. This is particularly the case because we have not witnessed markedly strong per capita GDP growth.

(2) The relationship with consumer sentiment is muddy, because credit-card utilization can be both a leading and lagging indicator, depending on the conditions. There is so much going on at the moment, from technological shocks to geopolitical uncertainty, I would not blame consumers for tightening their belts. Further, revisions to macroeconomic data have revealed their inaccuracies and contorted presentation. Such confusion dampens confidence in the US trajectory.

(3) More than 20 years has now passed since the release of The Coming Generational Storm by Laurence Kotlikoff and Scott Burns. This book foresaw the debt debacle we face today, with tension between the Baby Boomers and their progeny. While the United States continues to lead the world in many economic metrics and attract much of the world’s top talent, that position is shaky. Another government shutdown makes us aware of fiscal recklessness and mismanagement from the US federal government. The debt burden on the productive economy continues to grow, and I foresee the new normal of modest growth continuing long into the future.

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